The Reserve Bank has asked Net1 Applied Technology Holdings (Aplitec) to supply details of its pension smart card payment system, which can be used to draw cash, to ensure that it complies with legislation.
Aplitec has been working with the KwaZulu-Natal government for more than four years on the provision of smart cards to pensioners, but until recently, their use was restricted to cash dispensers provided by all of Aplitec`s mobile and fixed pay points in rural and urban areas. Now that a number of "cash-and-carry" type retail operators have joined the system, pensioners can draw part of their pensions in cash while also using the smart cards as a payment method in the stores.
Pension payments, particularly in rural areas, have been dogged by lack of infrastructure, high cost in servicing the pensioners and corruption from within and outside the various distribution systems, and often vehicles carrying pensions have been the targets of armed robberies. Provincial governments are largely responsible for pension payments and Aplitec currently does this in five of the country`s nine provinces.
However, the Aplitec system may run foul of the Reserve Bank and two acts of Parliament that govern the collection and distribution of money: firstly, the Banks Act that regulates deposit-taking institutions and secondly, the National Payments System Act, which governs how money is transmitted from one party to another.
"This week we were approached by the Reserve Bank to supply details of our system and we have sent it on," says Aplitec MD Serge Belamant. "But we have taken strong legal advice and we are confident that we do not transgress any laws."
This is not the first time Aplitec has been approached by the Reserve Bank. About three years ago the Bank appointed auditors to ensure that Aplitec`s systems meet various legal requirements at the time. However, by dispensing cash with the smart cards, the system may be sailing close to the legislative wind.
According to Belamant, his company loads the amounts onto the smart cards as directed by the relevant provincial authorities and so it does not take deposits and this absolves it from the Banks Act. He says the retail outlets use a simple cash-back type transaction, similar to that already used by credit card companies, to give money directly to their clients.
"The retailer supplies the requested amount of cash to the pensioner and then claims it back from Aplitec and we pay him the same day," Belamant says.
Aplitec is then refunded by the relevant province on a weekly basis and covers its interest charge through the management fee that it obtains from that government.
"The units on the smart card only become rands once they enter the formal banking service or are converted into cash," he says. "It costs the pensioner nothing and this is preferable to a pensioner holding a bank account which he or she cannot afford."
Belamant says his company`s systems have met a lot of opposition from the major commercial banks that are often competitors in bidding for the pension payment systems.
"Already with more than 7 500 payment points, we have more branches than the banks," he says.
Belamant says more than 1.7 million pensioners countrywide are using his smart cards and he expects this to grow to 2.4 million by year-end. Provinces using the system are KwaZulu-Natal, Eastern Cape, Limpopo, Northern Cape and North West.
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